Business Directories

Kuwait internet firm slams price cuts

Kuwait, September 28, 2012

Ageing fixed-line infrastructure is to blame for Kuwait's low broadband penetration, and price cuts ordered by the government this week will do little to boost subscription numbers, said an executive at a top Internet provider.

The Ministry of Communications is the de facto regulator in the absence of an independent watchdog, and also ultimately owns and operates the country's fixed-line infrastructure, with the four major Internet service providers (ISPs) paying the government to use this.

But the largely copper-based network cannot carry sufficient bandwidth to satisfy consumer demand, according to Essa Al-Kooheji, general manager at Qualitynet, which is 44 per cent owned by Bahrain Telecommunications (Batelco) and has an estimated 45 per cent market share for fixed Internet.

On Tuesday, the Ministry ordered the ISPs to cut prices by at least 40 per cent, slashing the price of an annual subscription for a 1 megabyte per second (mbp) connection to 48 Kuwaiti dinars ($170), while 8 mbps will now cost 200 dinars.

That means Kuwait is considerably cheaper than other Gulf countries; in Bahrain, for example, Batelco charges 120 dinars ($320) annually for a 1 mbp line and 360 dinars for 8 mbps.

But that will do little to improve fixed broadband take-up, said Qualitynet's Kooheji, with Kuwait's penetration of about 5.5 per cent half that of the UAE.

"We receive lots of calls from customers who want to upgrade and take the maximum speed for the price available, but they cannot do so," said Kooheji. "The government should put more effort into improving the telecom infrastructure rather than cutting prices."

Many businessmen and analysts in Kuwait believe the country's political environment is partly to blame for weak state investment in infrastructure.

Friction between the cabinet and parliament over the last several years has prompted frequent changes of government and slowed or blocked the passage of economic development plans.

Kooheji said only about 15 per cent of fixed broadband connections in the country used fibre, with the remainder on copper lines.

"The price cuts do not bode well for the sector, because it needs a lot of investment and the government hasn't come up any significant investment plans for next generation technologies like fibre-to-the-home (FTTH)," said Kenechi Okeleke, a senior analyst at Business Monitor in London.

"Other Gulf countries including Saudi Arabia, the UAE and Qatar have invested in FTTH - Kuwait is behind its peers in terms of broadband services."

Average connection speeds in Kuwait are 1.82 mbps, Okeleke said, while the UAE's are almost 5 mbps and developed markets 6-9 mbps.

Many Kuwait residents have opted for mobile broadband instead, which is provided by the three mobile operators Zain , Qatar Telecom subsidiary Wataniya and Viva, an affiliate of Saudi Telecom Co.